2017-03-01 00:00:00BookkeepingEnglishLearn how to calculate profit margins, and read the definition of a narrow profit margin. Review strategies for boosting profit margins.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Female-Bookkeeper-Calculating-Profit-Margin-Percentage.jpghttps://quickbooks.intuit.com/ca/resources/bookkeeping/narrow-profit-margin/What is Narrow Profit Margin?

What Is a Narrow Profit Margin?

2 min read

Although many people think that an [electronic funds transfer](https://quickbooks.intuit.com/ca/resources/payment-processing/what-is-an-electronic-funds-transfer/) (EFT) and [automated clearing house](https://quickbooks.intuit.com/ca/resources/payment-processing/what-is-an-ach-transfer/) (ACH) payment are the same thing, there are some key differences. A quick rule of thumb is that all ACH transactions are EFT transfers, but not all EFT payments are ACH transfers. Both payment methods allow for automatic funds transfers from your bank account, but they use slightly different methods to do so. If you have customers from out of the country, you’ll likely want to accept ACH payments. However, if you’re only conducting business inside Canada, accepting EFT payments should be sufficient.

## What Is an EFT Payment?

An electronic funds transfer is a paperless transfer, deducted from one account and almost immediately sent to another account. EFT payments serve many purposes, including customer billing, collections, and direct deposit payroll. You can use this payment method for one-time charges or to deduct reoccurring fees, such as monthly membership dues. These transactions utilize encryption for security, and there are many advantages of using EFT, including:

* Increased cash management efficiency
* Streamlined payment and collection processes
* Improved customer and vendor relationships
* Reduced exposure to fraudulent transactions
* Reduced overhead expenses
* No delayed or lost payments
* More accurate reporting of transactions

## What Is an ACH Transfer?

An ACH transfer is a type of electronic funds transfer used in the United States that links banks, creating a tally of credits and debits that are settled at the end of the business day. “ACH” stands for Automated Clearing House, the nonprofit association that runs the world’s largest electronic payment system. Businesses use ACH transfers to make it easy for customers to pay for goods and services.

Because your customers must know the transit and account numbers on their cheques to make a purchase using an ACH transfer, it’s often easier for them to use debit or credit cards to pay for single purchases. However, ACH transfers are often used to set up automatic payments for customers who’re making large purchases. It’s a good idea to make ACH transfers available as part of your online invoicing process so that your customers without debit or credit cards can make purchases online.

## Benefits and Downsides of ACH and EFT Payments

More [Canadian businesses are refusing cash payments](https://quickbooks.intuit.com/ca/resources/pro-accountant-tech/canadian-businesses-refusing-cash/). In order to remain competitive against other businesses, you should consider accepting various forms of electronic payments. There are many benefits to accepting electronic payments, including:

* Reduced accounting requirements
* Increased convenience for large transactions
* Less confusion about payment amounts
* Funds can’t be miscounted or misplaced
* Minimized security concerns

Don’t discount cash out just yet. There are many advantages to accepting paper bills, including:

* You can always accept cash payments, even during power and internet outages.
* There are no processing fees, risk of chargebacks, or insufficient funds charges.
* You’ll have instant access to your money. You don’t have to deposit checks or wait for payments to post.

Most people don’t carry large amounts of cash, so accepting ACH or EFT payments lets you make more sales. Take your small business to the next level by offering an easy way for customers to pay credit cards and other online payment methods. [QuickBooks Online](https://quickbooks.intuit.com/ca/payments/) can help you get paid faster. Start accepting payments today with QuickBooks.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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